The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors.  But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.  A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Ermenegildo Zegna (NYSE:ZGN). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

How Quickly Is Ermenegildo Zegna Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes.  So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research.   Ermenegildo Zegna's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 46%.  While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.  

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth.    Ermenegildo Zegna maintained stable EBIT margins over the last year, all while growing revenue 28% to €1.9b.  That's a real positive.  

In the chart below, you can see how the company has grown earnings and revenue, over time.  To see the actual numbers, click on the chart.

NYSE:ZGN Earnings and Revenue History April 8th 2024

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Ermenegildo Zegna's forecast profits?

Are Ermenegildo Zegna Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market.  Ermenegildo Zegna followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group.     Notably, they have an enviable stake in the company, worth €134m.   Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.  

Should You Add Ermenegildo Zegna To Your Watchlist?

Ermenegildo Zegna's earnings have taken off in quite an impressive fashion.   That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company.  At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here.  So at the surface level, Ermenegildo Zegna is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies.     Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Ermenegildo Zegna. You might benefit from giving it a glance today.  

Although Ermenegildo Zegna certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of  companies that not only boast of strong growth but have also seen recent insider buying..

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.